Westpac moves to cut New Zealand class share discount

By Nick Stride

Friday 23rd November 2001

PHILIP CHRONICAN: 'We don't want to put at risk the interests of our long-term holders'

Westpac Banking Corporation said yesterday it was exploring options to close the gap between the prices of its Australian and New Zealand shares.

Chief financial officer Philip Chronican said the company would talk to the Australian Tax Office about the possibility of making the two share classes "fungible" or exchangeable while maintaining for New Zealand investors the benefit of dividend imputation credits.

The initiative had been held up by the run-up to this month's election and by business tax reforms, Mr Chronican said.

"Now we have a newly elected government, we have the legislation in place, and we have people in Canberra with their heads clear so that's certainly something we can do now."

WestpacTrust New Zealand class shares were issued in late 1999 to build up a local shareholding base by allowing New Zealand shareholders to get imputation credits.

The New Zealand shares have traded at a discount of up to 20% ever since, mainly because trading liquidity for the 62 million on issue is far less than for Westpac's 1.8 billion head shares. The discount has stabilised recently at around 10%.

Mr Chronican said Westpac would rather there was no discount but the only way to make it disappear would be to make the two share classes fungible.

One disgruntled shareholder, New York-based hedge fund Elliott Management, has been having "discussions" with the bank over the discount.

Elliott specialises in taking short-term arbitrage positions and applying pressure to get a quick result. It has taken on the Peruvian government and Telecom Italia and was involved in a Panamanian debt restructuring exercise.

Since late January Elliott has built up a 5.1% stake in the New Zealand class shares.

Its representative, Mr Koh Tiong Sim, is on his way here to talk to the bank.

Mr Chronican said he understood Elliott also wanted the shares to be made fungible so to that extent their interest and the bank's were aligned.

"Being a fairly aggressive hedge fund their intention is that this [fungibility] is something that should happen fairly quickly so they can make their money and go," he said.

"Our motivation is to make sure whatever we do doesn't disturb the legitimate interests of the long-term holders of the shares. What we don't want to do is to put at risk the structure that allows New Zealand shareholders to get imputation credits."

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